The huge two-year budget agreement reached by Congress early this morning will, for the first time, allow Medicare to pay for some long-term supports and services. Medicare managed care plans, called Medicare Advantage (MA), can now include non-medical services, such as home-delivered meals or rides to a doctor, in their benefit packages.

The bill includes other changes to Medicare, including relief for seniors in the drug benefit’s infamous donut hole and the death of a government panel aimed at controlling program costs. It may also set the stage for raising Medicare premiums for high-income seniors and reduce funding for a public health program aimed at addressing conditions such as diabetes, and heart disease.

The CHRONIC Act

And while it seems at first glance to create some new benefits for seniors, it also sharply increases the federal budget deficit. And that, in the long, run, will put new pressure on programs such as Medicare, Medicaid, and Social Security.

The biggest immediate changes, however, were included in a bill called the  Creating High-Quality Results and Outcomes Necessary to Improve Chronic  Care (CHRONIC) Act of 2017. That bipartisan bill passed the Senate last October and was added to the big budget bill this week.

It not only allows managed care organizations to include social supports in their benefit packages, it also lets them tailor benefits to the specific needs of their enrollees. Before the change, the plans had to provide the same benefits to all.

Medicare Long-Term Services

This new flexibility will give case managers more options in designing care plans for participants and allow plans to experiment by offering the benefits in some geographic locations and not in others.

Until now, Medicare has not paid for long-term supports and services, though many consumers think it does. The bill allows MA plans to add those benefits but does not change the rules for traditional fee-for-service Medicare. Currently, about 30 percent of beneficiaries are enrolled in managed care.

The Trump Administration has already begun drafting regulations to implement the law. However, it may be some time before the change has widespread impact.

Plans must still figure out what benefits to offer. And since the vast majority of MA enrollees are relatively young and healthy, it may be some years before they take advantage of the services in large numbers. But the idea has the potential to refocus Medicare on the needs of those with chronic disease.

Watching Closely

The plans, consumer advocates, and others will be watching closely to see whether the new benefits reduce overall medical costs, which is the theory behind the new law. They’ll also be watching to see if   it drives more seniors to join managed care. MA provides a wider range of benefits at a lower price than traditional Medicare though plans also limit the ability of seniors to choose providers and may deny coverage for services they  deem unnecessary.

One other question: Will the new benefit encourage older and sicker seniors to shift to managed care? That could raise MA premiums, making the plans less attractive.

The other Medicare changes in the budget deal are less far-reaching and immediate.

One would require drug makers to give discounts to consumers whose medicine costs throw them into the donut hole. However, it won’t take effect until 2019.

Controlling Medicare costs

The law also ends a Medicare cost control panel that was an element of the Affordable Care Act. The Independent Payment Advisory Board was supposed to look for ways to reduce program costs if expenses topped a certain level. But Republicans attacked the committee as a “death panel,” and no members were ever appointed.

Nearly everyone agrees that the reason insurance premiums are expensive is that medical costs are high, and the IPAB seemed like a reasonable mechanism to root out waste in the system. The panel may be dead but the problem has not gone away.

Finally, the bill has probably forestalled cuts in Older Americans Act programs for the next couple of years. We won’t know for sure until Congress divvies up the new budget money. But social service programs such as Meals on Wheels, information and referral services, transportation, and others will likely be protected from cuts that have been proposed by the Trump Administration.

However, in the long run this budget deal could be bad news for these programs as well as for Medicare, Social Security, and Medicaid.  On top of the $1.5 trillion that last year’s tax cut will add to the debt over the next 10 years, this bill will add another $325 billion-plus over just the next two years. Annual deficits are expected to run in excess of $1 trillion-a-year—a rate that is unsustainable.

At some point, interest rates will rise steeply and there will be great pressure to reduce spending, especially for mandatory programs such as Medicare and Social Security. So enjoy the new benefits while you can.